Business Organization: Forms of Business Ownership презентация

Limited Company
Public Limited Company
Joint Venture
Franchise

Form of Business
Ownership Decisions

Access to Funding

Control of Business

Taxes Paid
by Business

Value of Firm

for which the owner is liable/responsible

Limited Liability – responsibility only for the amount of money invested into business

Legal Personality – legal identity separate from its owner

stop the business from running

Going Public – the act of initially issuing stock to the public

trader

Full control by the owner

Limited access to funds

The business is likely to remain very small

The owner has unlimited liability

Only Personal Income of the owner is taxed

taxes

“-”
Owner incurs all losses
Unlimited liability
Hard to raise funds
Limited skills
No continuity

have unlimited liabilities

More funds:
Additional capital injected by each partner
Easier access to funds through creditors

Shared decision making

Shared profit and losses

limited to the cash or property they contributed to the partnership
Does not take part in decision making

General partner
Manages the business
Receives a salary
Shares the profits or losses of business
Has unlimited liability

are shared
Shared control
No continuity

*With some exceptions and in certain cases

partners have limited liability

Precise rules on liability protection vary from one region/state to another

Added complexity, compared to partnership

Have become popular in recent years

its owners

Corporate Charter – a document used to incorporate a business (describing important aspects of corp.: name, stocks issued, operations, etc.

Corporate Bylaws – general guidelines for managing the firm

elect Board of Directors
Board of Directors establish general policies, elect/replace Officers (CEO, CFO), etc.
Shareholders receive dividends

to a small group of investors (original owner, friends, relatives, employees, etc.)
Shares cannot be sold on the open market
Control often remains in hands of the original owner(s)

Publicly Held Corporation (Plc., Inc.) – shares can be easily purchased or sold by investors
Issue stock to public (go public)
Simplicity and flexibility in buying/selling stock
Higher degree of “divorce between ownership and control”
Agency problems and short-termism

legal personality
Continuity

“-”
Legal formalities in business formation
Fluctuating share prices
Financial disclosure to public / inspection
Risk of takeover
Agency problems

and selling in another
Producing different parts (automobile industry)

Not a merger, but can lead to one

Costs and risks are shared

Different strengths and experiences

Access to different markets whenever this is the case

Culture and management styles may be different

Potential conflicts over the errors

Failure of one business will put the joint venture at risk

trademark, trade name, or copyright, under specific conditions
E.g. McDonald’s, Body Shop, Pizza Hut, etc.

Styles of management and production provided by franchisor

Already recognized name

Some financial support

Profit is shared with franchisor

Less control

one is best?

Cambridge University Press

Madura, J. (2001) Introduction to Business, 3ed., Thomson South-Western.

Kourilsky, M. (1995) “The New Youth Entrepreneur: Types of Business Ownership. Module 7.” Ewing Marion Kauffman Foundation, Kansas City, NJ
Jan Norman (2003) “For Small Businesses, LLC Option Offers Advantages, Disadvantages” Orange County Register, Santa Ana, CA.

Jan Norman (2005) “Liability, tax structure ownership”, OCRegister.com http://www.ocregister.com/ocregister/money/smallbusiness/qanda/article_466664.php
“Business Divorces and Who Gets Custody of Intellectual Property” (2002) Business North Carolina, 22(10), p.66

Lange, K (2002) “Spotlight on Limited Liability Companies” SCORE, www.score.org/leg_5